Johann T. and Johanna Hess - Page 15

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          Andrews v. Commissioner, 79 T.C. 938, 940 (1982).12  However,               
          where actual sales prices are unavailable, the value of the                 
          shares is determined by taking into account the company’s net               
          worth, prospective earning power and dividend-paying capacity,              
          and other relevant factors.13  Sec. 25.2512-2(f), Gift Tax Regs.;           
          see also Rev. Rul. 59-60, 1959-1 C.B. 237.  These factors cannot            
          be applied with mathematical precision, and, therefore, the                 
          weight to be given to each factor must be tailored to account for           
          the particular facts of each case.  Estate of Andrews v.                    
          Commissioner, supra at 940-941.                                             
               As is often the case where the value of stock in a closely             
          held corporation is at issue, the separation in the values that             
          the parties and their experts argue is substantial.  The gift tax           
          returns that petitioners filed reported the fair market value of            
          a minority interest in HII stock as $120,000 per share.14  In the           


               12Since the same factors are used for gift and estate tax              
          purposes in determining the fair market value of property, we               
          cite both gift and estate tax cases.  See Ward v. Commissioner,             
          87 T.C. 78, 101 (1986); Estate of True v. Commissioner, T.C.                
          Memo. 2001-167.                                                             
               13The regulations provide that some of the “other relevant             
          factors” to consider are:  The goodwill of the business; the                
          economic outlook in the particular industry; the company’s                  
          position in the industry and its management; the degree of                  
          control of the business represented by the block of stock to be             
          valued; and the values of securities of corporations engaged in             
          the same or similar lines of business which are listed on a stock           
          exchange.  Sec. 25.2512-2(f), Gift Tax Regs.                                
               14The gift tax values which petitioners reported on their              
                                                             (continued...)           




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